If you’re running a business in Australia, you’ve probably come across all the complicated issues around payroll. Don’t worry if it all seems a bit overwhelming - this article will help you find out what you need to know about payroll withholding tax.
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Payroll
Payroll Withholding Tax
Setting up payroll withholding
What is payroll withholding tax?
Payroll withholding tax refers to the amount of tax withheld from a worker’s salary by an employer, who in turn remits this payment on the employee’s behalf.
How does payroll withholding tax work?
This article will focus on payroll for Australian companies only. In Australia, payroll withholding tax works through the Pay As You Go (PAYG) system. In the simplest terms, if you’re an employer, it’s your job to work out how much tax your employees owe, subtract it from their pay and send it to the Australian Taxation Office (ATO).
You do this every time you pay your employees, and the process is the same for salaried workers as it is for those paid by the hour.
At this point, it’s worth noting a potential source of confusion. Some US sources talk about ‘withholding’ payroll tax as if it’s a separate thing. In fact, the term doesn’t seem to be used in Australia in this context, and instead refers simply to the standard way of paying tax collected via payroll. Though it is worth noting that deductions that are not tax related may be remitted to separate bodies.
Reporting payroll withholding to the ATO
If your small business needs to withhold payments from employees you need to register for PAYG withholding before you make any payments.
As always, it’s crucial you keep your accounts up to date. In addition to making sure your workers are getting paid the correct amount, you also need to report and send the PAYG withheld (PAYG-W) to the ATO by the 21st of every month if you are on a monthly schedule for reporting, or by the 28th of the month following the end of the quarter if you are on a quarterly schedule for reporting. Your PAYG-W is usually reported on instalment or Business Activity Statements.
Consider the steps below to ensure you are compliant with PAYG withholding.
- Register for PAYG withholding on the Australian Taxation Office website
- Withhold amounts from employees payments
- Automatically report PAYG withholding via Single Touch Payroll (STP) compliant software such as QuickBooks Payroll
- Lodge a PAYG withholding annual report for all the payments not reported and finalised through STP
Stay compliant with QuickBooks
Do you have employees on payroll? Choose QuickBooks Payroll powered by Employment Hero to automate your payroll process end to end and have assurance you’re staying compliant and accurate. For tips on setting up QuickBooks Payroll, head to the Payroll Resource Hub for articles and guides to help you get started.
Disclaimer: Intuit does not provide professional advice. We may provide you with information that may be of use to you, however this is not to be considered as a substitute for getting your own professional advice. Intuit is not liable to you for your use or reliance on the information provided by it.
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